Pakistan’s train to Panama

By Zaigham Khan

In his address to the nation, Prime Minister Nawaz Sharif narrated the history of his family to defend himself from accusations related to the Panama Leaks. While many analysts have found his historiography irrelevant to the debate, in my opinion nothing helps us in deciphering a situation better than its background and context.

No family has lived the ‘Pakistani dream’ better than the Sharif family and their history, in many ways, reflects the history of Pakistan. Here, I want to go one step behind Premier Sharif, to look at some historical developments in order to make sense of the current crisis.

The Sharif family migrated to Pakistan sometime around the eve of independence when the tragic transfer of population opened up a huge venue of opportunity for a small number of Muslim entrepreneurs. The contribution of industry to the national income was merely one percent. By 1959, industry’s contribution was over six percent and industrial assets had increased over nine fold. An open playing field in a captive market and huge concessions from government were major reasons for this exponential growth. It was during this period that Ittefaq turned from a humble furnace into a proper foundry.

Capitalism

During the next decade, Pakistan went through an impressive phase of industrialisation under Field Martial Ayub Khan based on a model of crony capitalism. As an economist notes: “General Ayub Khan willingly (political advantage) or inadvertently (weakness and incompetence) ushered in an era of crony capitalism that is still the bane of Pakistan’s economy. Thus, Pakistan kept shielding industrialists from external competitions via tariffs and internal competitions via permits.” It was during this decade that Ittefaq turned into a business empire and the Sharifs became one of the leading business families.

Under Bhutto, in the 1970s, industrialists who had benefitted so far, saw their fortunes coming under the cloud. Stepen P Cohen notes: “The combined effect of 1971 war and the Bhutto nationalization certainly ended the domination of the top 22 families. It would be years before big business would trust the government enough once again to make new investments.”

As the Prime Minister painfully mentioned in his speech, it was during this period that the Sharifs also lost their industry to nationalisation.

However, this decade will also be remembered for providing an unprecedented opportunity for upward mobility to the working classes.

During the 1970s, Pakistani migration to Arab countries started with the oil boom, giving millions of families a chance to rise above the poverty line.

Under Zia, the geography and the nature of opportunity were transformed. This time, an economy based on religion, war and crime was created. Those involved in drug trafficking, smuggling, arm dealing and jihad joined the ranks of the Pakistani elite.

A whole new class of criminal elite was created in Fata and parts of Khyber Pakhtunkhwa. It was during this period that the ulema acquired land cruisers and their humble hujras turned into air-conditioned mansions.

The 1980s also saw politicians becoming corrupt, something that was unheard of till the 1970s. A nexus between politics and business was created and politics became the quickest and easiest way to get rich. Many political businessmen received over-invoiced loans that were gobbled up and written off. The Sharif family also turned a corner as Nawaz Sharif joined the Punjab cabinet and Ittefaq was returned to the Sharifs.

Despite a return to democracy, the 1990s saw more of the same as the PPP jumped into the muck headlong and Asif Zardari’s name became synonymous with corruption and the sugar industry. In fact, no industry symbolises the nexus between politics and business better than this lucrative industry. During this period, Ittefaq grew exponentially, breaking all boundaries. The Sharifs not only set up their own sugar mills, they manufactured sugar plants, for which licences and loans were granted by the Sharif government. In this manufacturing business, Ittefaq competed with and outperformed the state-owned Heavy Industries Complex, Taxila.Musharraf’s coup created a divergence between the Sharifs’ fortunes and national development, forcing the family into exile even when other industrialists were able to fatten their industries and assets. During this period, the Chaudhrys, a Chinese replica of the Sharifs, were able to make it big.

Region and war-based economy

Just before the coup, Hussain Nawaz was being groomed as the heir apparent to the Sharif family. However, during his imprisonment, he had to undergo through a lot of psychological torture, explained to me once by his wife. It was perhaps during this time that Hussain decided not have any truck with politics.

His decision to work through offshore companies appears to be aimed at evading or avoiding taxes from the British Homeland Revenue, rather than hiding anything from Pakistani authorities – not because he has nothing to hide – but because Pakistan’s toothless taxation system is not a threat to a daylight robber, let alone a shrewd prince.We are only stealing Western vocabulary when we link offshore accounts of Pakistani nationals with money laundering or taxation. Only those who are politically vulnerable or have global business ambitions need such a facility.

The word money laundering entered into our dictionary because of the American war on terrorism and the only high-profile Pakistani who has been prosecuted for the crime is a fashion model, and we know well that it wasn’t her money bag that got her into trouble.This situation sustains and is likely to remain unchanged due to an unwritten social contract between the ruling elite and the middle class.

-The News